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 Overview

You can issue or sell an item, even if there is not enough quantity on hand. An item using the LIFO or FIFO valuation method results in a negative cost tier. Print the Inventory Negative Tier Report to list tiers with negative quantities. Cost tiers with negative quantities distort the true inventory cost as new items are received at different unit costs.

To correct negative tiers

To ensure that LIFO and FIFO items are correctly costed, you must adjust the negative cost tiers in one of the following ways:

• Inventory Negative Tier Adjustment

• Transaction Entry

Inventory Negative Tier Adjustment

1. Select Inventory Management Utilities menu >  Inventory Negative Tier Adjustment.

2. Click Print to automatically apply positive balance cost tiers against the negative quantity. For more information, see Inventory Negative Tier Report.

The difference in cost between the negative and positive tiers is posted to the general ledger Inventory and Adjustment accounts. For more information on period-end processing, see Period End Processing.

Transaction Entry

1. Select Inventory Management Main menu > Transaction Entry.

2. In the Transaction Type field, select Adjustments to correct negative quantities for LIFO or FIFO items. Complete the fields on the Header tab.

3. Click the Lines tab. Adjust a positive quantity against the negative cost tier (the Overdist tier for LIFO or FIFO items) to bring the balance of the tier to zero.

4. Adjust the negative quantity against one or more tiers with a positive balance, so the total distribution equals the positive amount applied against the negative tier.

 Example - Correcting Negative Tiers

Assume that Widget-50 (a FIFO item) has the following cost tiers.

Date	Reference	Quantity	Unit Cost
N/A	Overdist	-15.0	$ 9.50
05/05/03	1010	10.0	$10.00
05/31/03	1020	30.0	$12.00

Given these tiers, the following lines must be entered in Transaction Entry to adjust the negative quantity of 15.

Line Number	Item Code	FIFO Reference	Qty	Unit Cost
01	Widget-50	Overdist	15.0	$ 9.50
02	Widget-50	05/05/03 1010	-10.0	$10.00
03	Widget-50	05/31/03 1020	-5.0	$12.00

In this example, the net difference of the adjustments ($17.50) is posted as a credit to the Inventory account and a debit to the Adjustment account.